Firstly, it is important to make sure that you are clear about your budgeting goals. How much are you aiming to save each month, and where will the remainder be spent? After all, even if you’ve got a great credit card deal from somewhere like lovemoney.com, you will still need to prioritize your outstanding payments above the money which you might otherwise allocate to various leisure activities. Rather than being vague and simply suggesting that you ‘budget’ in order to ’save’, you are far more likely to achieve your aims if you set specific goals and limitations on your overall spending.

Another good way to stick to your budget is to try and use cash wherever possible. Paying by card can sometimes be much too easy, and you are more liable to forget that the money which comes out of your account can be eating into your budget. By handing over physical cash, you will be automatically more aware of exactly how much money is changing hands each time you make a purchase.

Rather than just wandering around various stores when you are picking up your family’s groceries, make a list of what you actually need while you’re at home, and then stick to it. It is also a good idea to hang on to your receipts, so that you can keep a record of exactly how much of your budget has been spent, and where.

This sale was GREAT in that it put a couple hundred thousand into the bank pretty fast.  What was NOT so great was that I was GIVING UP the approx. 50K in income that those restaurants provided each year. 

I learned a hard business lesson that many business owners simply don’t consider when they sell their businesses.  It is easy to think, “Great, I’ve got a large chunk of money!”  It is not as easy to think, “Wow, I need to change my lifestyle as I just gave up a recurring revenue stream!”

That being said, in 2008 my family needed to change our spending habits SIGNIFICANTLY or we risked blowing our entire nest egg.  Here is a snippet of what we did to cut 30K of fat from our budget without too much lifestyle change.  And I can tell you it felt AWESOME to get the spending under control!  As a family we didn’t feel like we were giving up much at all…2008 was probably our best year yet!

BIG CHANGES:

1.)  Gave up expensive travel and vacations for frequent camping trips to local state parks.  $6000 yearly savings!

2.  Gave up eating out all the time and trying to buy “Organic Everything!”  $3500 yearly savings!

3.  Stopped shopping when we were “bored” and realized our closets ALREADY were overflowing!  $4000 yearly savings!

4.  Got rid of our most expensive auto payment.  $5000 yearly savings!

5.  Gave up going to the movies and out with friends all the time and traded it for Blockbuster Online and popcorn with our girls.  We were spending almost $3000 per year on BABYSITTERS!  Crazy, I know!  $4000 yearly savings.

Smaller Changes:

1. Refinanced our mortgage to a 5.50% 30 year fixed rate.  $1800 saving per year.

2. Appealed our property tax assessment.  $500 savings per year.

3.  Learned how to set our programmable thermostat, and dropped the temperature about 3 degrees.  $800 savings per year!

4.  Dropped expanded cable and phone service $1200 savings per year.

5.  Stopped mindlessly driving everywhere and stuck to a fuel budget.  $2000 savings per year.

6.  Misc. small cuts not worth mentioning $1200 savings per year.

I hope this helps some of you and encourages you to “tighten up the belt!”  I know it is a lot more sexy to buy a new 60 inch plasma than to increase your permanent life insurance coverage…but what has the better long-term payoff for your family?  That’s what we all need to decide!